Saturday, July 19, 2014

In the midst of restructuring came another tragedy … the MH17. It will add more uncertainty to its fate. The worst available options – such as bankcruptcy and splitting up the group’s various business units.

The shooting down of MH17 though is not MAS’ mistake, but fear that the airline’s second crash incident within four months would further affect ticket sales, thus decreasing more of its cash flow. A further drop in sales arising from the MH17 incident could deal a severe to blow to its financials.

Nevertheless, the MH17’s victims will be covered by insurance. Hence it will result minimal direct impact on MAS’ cash flow.

Yet, it will be costly affair to rebuild trust in MAS as well as its image. In the interim, MAS will have to continue with its aggressive campaigns by slashing price.

With two major incidents within six months, consumer sentiment on MAS’ safety record has been deeply affected which further dampens its hope to turn around by 2015.

Furthermore, MAS’ position in the OneWorld alliance may be affected due to the poor record.

As MAS practices a load active yield passive strategy, having a poorer passenger turnaround will worsen its losses.

Worse us yet to come as the first quarter results did not fully reflect the impact of MH370’s disappearance on March 8 2014.

Some however opine the MH17 incident might not be as bad as that of MH370. In this case, MAS is a victim. No one can blame it for the crash.

The MH17 is the latest tragedy might be the last straw for MAS given its flailing state and daily cash burn rate of rm5 million.

Observers opine it is now (July 2014) best time for Khazanah Nasional to privatize MAS. Customer perception is bad, and it will take very long time to overturn that.